Thursday, March 31, 2011

In the next few weeks we are going to begin our review of the Federal Reserve and their role in the economy. Without question, the chairman of the Federal Reserve is the most important person when it comes to the markets.

Friday, March 25, 2011

I read this paper a few months ago and was hesitant to post it on the blog, but now it has made the rounds through the media. I think it should open up an interesting discussion, what have you learned in college?

Received this article from our associate dean, thought it was interesting. We are already seeing business shift their hiring into more rigorous fields.

To some extent, of course, businesses do look elsewhere. If you look where top CEOs went to school, it is obvious that a disproportionate number attended schools without undergraduate business degrees –most Ivy League schools, other elite private universities, and top liberal arts colleges fit that description.

The most popular major among Ivy League schools, economics. There is a reason finance, economics, and accounting offer salary premiums. They are rigorous and align with business needs.

It's been a slow week with the issues in the middle east and earthquake in Japan. Here is an article talking about the biggest threats in the economy. It also proves I'm not crazy for my thinking on cutting short-term government spending.

As for oil, I've given a dozen or so talks to trade groups around Spokane and Eugene. In every one of them I was asked about my view on our economic recovery. My answer always started with, "well it will ultimately depend on oil prices." These next few months are going to be critical in our recovery. If oil continues to increase our recovery will stale.

Friday, March 18, 2011

Thursday, March 17, 2011

During my short time advising students I've quickly realized a large benefit to taking summer classes. At first students are generally opposed to summer courses (the cost and time), but from my personal experiences the benefits greatly outweigh the costs.

I think it's beneficial to discuss the costs of summer courses. Summer courses are cheaper than fall and spring $600 per credit v $820 per credit, respectively. But the summer courses usually don't allow for financial aid. For many students the idea of paying $1800 for a summer class seems a bit high, but before jumping to a conclusion let's go through a marginal cost/marginal benefit analysis.

Many seniors enter their final semester needing 12-15 credits to graduate. Let suppose you didn't take any summer courses and need 12 credits to graduate. At today's tuition it will cost you $15,200 to take those 12 credits (block pricing 12-18 credits cost the same amount). Let's assume you decided to take one summer course at $1,800. Now you only need 9 credits to graduate. Again using today's tuition $820 per credit, the 9 credits will cost you $7,380. That means you will end up spending about $9,000 for those same 12 credits. That's a savings of $6,000. The university assumes the per credit rate during the fall and spring ($820) assuming the student takes 18 credit hours, most students don't take 18 credits and end up paying a higher rate.
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What you need to do, sit down and go through your schedule. This is good time because you're meeting with your adviser. I will be happy to help anyone figure out their schedule as well. The more courses you need in the final semester the smaller the benefit becomes. Suppose you need 15 credits to graduate. If you take two summer courses the cost will be $3,600 plus the $7,380 for your spring semester. Again you'll save about $4,200 by taking two summer courses. Every summer course you need to take will reduce your gain by $1800.

The key in taking summer courses is to make sure you are taking less than 12 credits your final semester after complete the summer courses. If you're taking 12 credits during the semester you are actually paying $1270 per credit compared to $850 per credit for 1-11 credits.

What about financial aid? Taking less than 12 credits will make you a part time student, but generally financial aid will get prorated. I would urge you to sit down with the financial aid office if this is a concern. From my own experiences, I was able to take two summer courses and complete my degree a semester early. My parents were relieved to save $10,000. In the end, college is expensive, but there are some simple things everyone can do to make it less expensive.

Who want's to take a class during summer? Again from experience, you'll be glad you took that summer class when time roles around to your senior year. The last thing you want is 4-5 finals before graduating. Think about how you felt graduating from high school (seniorities), it's 10x worse in college.

What about courses?

This year the economics department is offering both 201 and 202 over the summer. This will help students get ahead or prevent others from falling behind. Many students in other disciplines quickly realize 201 and 202 are often prerequisites for graduate school. Ec 202 will be offered in class and online and EC 201 online.

In addition to the principles courses, we are also offering Sports Economics, Global Economic Issues, and Economics of Financial Crises. Sports and Global have a requirement of 201 and Crises 202. All three courses will be offered online. All three courses will count for an upper level economics elective (key for those doing an economics concentration) and 311 counts for the IIE credits all business majors need.

Thursday, March 10, 2011

It appears the job losses are in the areas of those working for the federal minimum wage. This matches up with high unemployment rates for those between 16-19 and those under 25 without a high school degree.

Recently updated statistics for the US Treasury show China is continuing to purchase US government debt. Officially they hold more than $1.1 trillion (of the $8 trillion that's held publicly). Earlier this year, Ben Bernanke stated they probably hold more than $2 trillion.

I see this as a good thing for a couple of reason. First, it will help keep interest rates low as government struggles to cut the deficit and the economy slowly recovers. We need to keep our low interest rate loans from China until our economy recovers and households pick up their savings. It shows China still has confidence in the US governments ability to repay the debt. Although I've disagreed with how the Republicans are cutting spending (short term vs long term) it's very likely their mentality of controlling the deficit will reassure foreign investors our desire to contain our future deficits.

To see why short-term spending cuts are bad when you are trying to cover read this article that references Moody.com's Mark Zandi (one of the more popular economists today).

Moody's predicts the spending cuts would reduce growth by 0.5% this year and 0.2% in 2012
Goldman Sach predicts the spending cuts would reduce growth by 2% in the second and third quarter this year.

Like I've said before, we need to contain budget deficit and it needs to be a priority, but simply cutting spending areas in the short-term is not the fix we need. It further weakens a struggling economy and it doesn't address the primary budget issues (medicare, defense, and social security).